Opinion Former Article

CIOT: Autumn Statement: Boost for small business but admin burdens remain heavy

Commenting on the announcement1 of a tenfold increase in the 100% Annual Investment Allowance for two years from January 2013, Andrew Gotch, Chairman of the Chartered Institute of Taxation’s Owner Managed Business Sub-committee, commented:

“This is a very generous increase that will be warmly welcomed by many small businesses. It is an open invitation to almost all businesses to invest and get a 20% (or more) subsidy for all their plant and machinery investment.

“However we note it is only a temporary increase. Business would really welcome some stability in this area. In recent years the allowance has fallen from £100,000 to £25,000. Now it will rise to £250,000 before, apparently, coming back down to £25,000. Businesses like certainty above everything and the chopping and changing of AIA has been a problem.”

Commenting on the Government’s intention to reduce burdens on business and individuals and make the tax system clearer and more efficient, Andrew Gotch said:

“There is a mixed bag on the admin burdens front.

“Proposals to require businesses to submit PAYE returns in ‘real time’, while recently improved, will still add substantially to the administrative burdens on business. There is still a long way to go for the Government in this area.

“The additional online services for business will no doubt be welcome, but it is crucial that these are available to their agents in a way that agents can easily access the information.

“Finally, a system of cash accounting for the smallest businesses, as envisaged by the Office of Tax Simplification, would reduce burdens and compliance costs for those businesses. The OTS’s proposals were for a truly simple system that businesspeople can understand but HMRC’s initial proposals were not. It does sound as if changes are afoot and we can only hope that the result is what it should be: a simple system.”

Notes to editors

1. The Autumn Statement document states:
2.74 Annual Investment Allowance – The Government will increase the Annual Investment Allowance limit from £25,000 to £250,000 for two years for all qualifying investments in plant and machinery made on or after 1 January 2013.

2. The Autumn Statement document states:
2.94 Cash basis for calculating tax – The Government confirms introduction of a new cash basis for small, unincorporated businesses to calculate their tax from April 2013. Businesses with receipts of up to £77,000 will be eligible and will be able to continue to use the cash basis until receipts reach £154,000.

1.138 To reduce burdens on business and individuals and make the tax system clearer and more efficient, the Government will:

• significantly expand the online services HMRC offers to taxpayers …
• introduce a target to reduce the annual cost to business of tax administration by £250 million by the end of the spending review period

3. The Chartered Institute of Taxation

The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 16,500 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

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